There were several companies over the past week which announced their intent to raise dividends to shareholders. It is always great to see companies that are able to extend their long streaks of annual dividend increases. I find dividend increases to be a good indicator of how company executives feel about the near-term business environment. It also shows their confidence in the company’s growth prospects.
Factors that boards of directors consider when setting the dividend include future earnings expectations, payout ratio and dividend yield relative to those at peer companies, as well as returns available on other income-oriented investments.
This is why I find it very helpful to review dividend increases every week for established dividend growth companies. To be included in this list, a company should have managed to reward shareholders with a dividend hike for at least ten years in a row.
I focused on companies that can afford to grow dividends for at least a decade. I figured that a company which has managed to boost dividends during a recession and an expansion, or even longer, is better suited for further research by a long-term dividend growth investor like me.
In my previews, I look at the most recent dividend increase, and compare it to the ten year average. While there are some year-over-year fluctuations in dividend growth, it is helpful to see if dividend growth is decelerating.
In addition, it is helpful to review trends in earnings and dividends, alongside dividend payout ratios. This is another indicator of dividend safety.
Last, but not least, I also try to review the valuation behind every company. I prefer to buy future dividend income at attractive valuations; overpaying for future dividend income is not a good business decision.
Hormel Foods Corporation (HRL) develops, processes, and distributes various meat, nuts, and food products to retail, foodservice, deli, and commercial customers in the United States and internationally. The company operates through four segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International & Other.
Hormel Foods increased its quarterly dividends by 5.80% to $0.275/share, marking the 57th consecutive annual dividend increase for this dividend king.
The company has managed to grow annual dividends at an annualized rate of 8.87% over the past five years.
The stock sells for 27.27 times forward earnings and yields 2.23%.
HP Inc. (HPQ) provides personal computing and other access devices, imaging and printing products, and related technologies, solutions, and services in the United States and internationally. The company operates through three segments: Personal Systems, Printing, and Corporate Investments.
HP increased quarterly dividends by 5% to $0.2625/share, marking the 13th consecutive year of annual dividend increases for this dividend achiever.
The company has managed to grow annual dividends at an annualized rate of 13.50% over the past five years.
The stock sells for 9.08 times forward earnings and yields 3.48%.
The company has managed to grow annual dividends at an annualized rate of 12.28% over the past five years.
The stock sells for 14.34 times earnings and yields 0.88%.
The York Water Company (YORW) impounds, purifies, and distributes drinking water. It owns and operates three wastewater collection systems; five wastewater collection and treatment systems; and two reservoirs.
The company increased quarterly dividends by 4% to $0.2027/share. This dividend champion has increased dividends for 26 consecutive years.
The company has managed to grow annual dividends at an annualized rate of 4% over the past five years.
The stock sells for 33.06 times forward earnings and yields 1.78%.
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